Agility key in insuring Olympics gold

Look closely at Chicago's Olympics bid and it is clear there is a big difference between assurance and insurance, and without insurance, all the assurances in the world would not make a difference.

Insurance, in the end, is the only reason any rational person can support Chicago's Olympics bid. Insurance policies guarding against nearly every imaginable catastrophe -- from games cancellation to terrorism to tornadoes -- are all that stand between Chicago taxpayers and potential deficits that could suck billions out of their pockets.

Assurances only go so far. Chicago 2016 says it can raise $705 million in tickets -- the highest since the Sydney Olympics. It's a reach, but doable.

Chicago 2016 expects $1.8 billion in sponsorship revenue. The number is unprecedented, but the Civic Federation and experts in sponsorship have said the number is not impossible.

Assessing Chicago 2016's insurance coverage is the flip side. To accurately judge insurance risks, people with boundless optimism about all other aspects of their venture must become creatively gloomy. To miss a dark thought is to expose the Chicago Games -- and Chicago's taxpayers -- to untold losses.

Insurance does not dwell in suppositions and debates. It dwells in the world of carefully constructed codicils and unanticipated eventualities. The person who fails to anticipate the eventualities will, no doubt, get tripped up by one of the exclusionary codicils.

In this world where syntax can be the difference between profit and disaster, Chicago 2016 Chairman Patrick Ryan has traveled almost without peer.

To a man with a hammer, every problem looks like a nail. To a former insurance executive with an Olympics to sell, insurance became the tool to close the deal.

Because Ryan spent his career at Aon Corp., a company whose main line of business is constructing custom-tailored policies that match exotic risks with creative protections, he naturally came to a view that insurance could answer all questions about the risks of a Chicago Games.

Now that we know the answer, it is time to focus on the key question: Is Chicago 2016 buying enough and the right kind of insurance to guard against all conceivable risks of a Chicago Olympics?

After studying the policies put forward by Chicago 2016 and taking into account the statements by critics, experts, insurance veterans and Olympics officials, the answer begins to emerge. Chicago 2016 seems to have guarded against nearly every risk that comes to mind -- at least today.

The committee expresses a desire to adjust as new risks emerge. But it never is possible to say all conceivable risks are covered.

Chicago 2016 will buy $1.2 billion in key coverage. In response to public concerns, the bid committee at the last minute changed the way the insurance is staged. The bid committee now is committed to a plan by which Olympics organizers would have to burn through a $450 million budgeted surplus, plus $1 billion in insurance payments, before tapping into taxpayer guarantees.

The coverage they lay out buttresses backstop against backstop with an eye toward the buck stopping somewhere other than Chicago should events go terribly badly. Of course there is no insurance policy against corruption or horrendous cost overruns at the Olympic Village. But they have invented one new kind of protection -- capital replacement insurance -- specifically in response to the disaster that occurred in Vancouver, where Olympics officials burned through more than $200 million after their key Olympic Village developer could no longer pay its bills.

Should a developer of Chicago's Olympic Village go belly up, an insurance policy would replace the investment funds the developer was obligated to produce.

The final $500 million of coverage, a so-called "all-risk clash policy," goes into effect only in 2016 and would pay off only under extreme circumstances, such as the cancellation of the games.

A few days ago, a group of Chicago 2016 executives methodically answered questions about coverage put to them by a team of Tribune reporters. Terrorism? we wondered. Covered. Plague? Covered. A major boycott? Covered. Hurricane off Lake Michigan? Covered.

Try as we might, we failed to come up with a major insurable risk for which there was not some sort of coverage.

"The insurance industry is a pretty innovative industry. If we can make it better, we will make it better," said David Bolger, chief financial officer of Chicago 2016 and a former top Aon executive.

Plenty of innovation will be necessary. Between now and 2016, new risks are bound to emerge. Chicago taxpayers will not be safe unless the Olympics organizing committee is smart and agile enough to guard against the unforeseen risks too.